Investment lessons from cricket

Cricket - India v Australia - Third Test cricket match - Jharkhand State Cricket Association Stadium, Ranchi, India - 20/03/17 - Indian players celebrate the dismissal of Australia's Shaun Marsh. REUTERS/Adnan Abidi - RTX31TR7

Anuj Shah

While watching cricket it may seem like the game is all about two batsmen, a bowler and a bunch of fielders chasing that ball. Who by a stroke of luck end up winning or losing! But mind you behind every successful team cricket team there is not only a well balanced team of players, there is an excellent coach, a lot of strategy planning and calculated execution. This is what makes them winners. There is a lot we can learn from the game of cricket and apply it to the world of investing.

Your investment lessons   

It’s all about team work! Every team has the right mix of players who have different skills but each complementing the other, be it batting, bowling or fielding. There could be an all rounder, a biffer (attacking batsman), a blocker (defensive batsman) or a Chinaman (wrist spinner). There are times when the team needs to strike, at other times they need to be defensive.

Hence, a mix of players with different abilities makes a winning team. In investing too, to be able to meet your financial goals you need to invest across a variety of asset classes as each of them plays a different role in your portfolio. Different asset classes have fluctuating returns and correlations over different time horizons. Remember, no one asset class tends to outperform the other consistently, making it crucial to diversify.

Patience is the key. In cricket, it is important to stay in the game. To be able to do so you must play with patience, hastiness isn’t rewarded. Remember India’s coolest capital, MS Dhoni? He is calm, no matter what. Although it may seem like cricket is all about the 4's and the 6's, it is not, it is about how you stay on the pitch and take those runs in between as well. The same goes for bowling. You have to focus on bowling the right length at the right speed and spin, while maintain that calm. In investing too, patience is the biggest virtue. In the beginning, it may appear that your portfolio is hardly gaining momentum, which could leave you with doubt if you have chosen the right investments. Many investors panic when things go wrong and sell at a loss only to regret later when the market bounces back. Only if you remain invested for the long term can you benefit from different market cycles and from the power of compounding!

Achieve your target systematically! Cricketers always have target in mind when they are playing cricket -- they could be chasing a score or setting a score. They have to work towards that goal irrespective of the obstacles in their way, which could be a bad pitch, a chucker, an attacking batsman, and many more. They take this in their stride and take a step by step approach towards achieving their goal. This philosophy applies to the world of investing too.

In investment parlance you are chasing a goal – your retirement, your vacation, your child’s education, your child’s marriage, to name a few. The best way to achieve this is by investing systematically so as to meet your objective. Yes, a Systematic Investment Plan (SIP) helps you overcome the market volatility thereby allowing you to reach your target in the end. As and when you have surplus cash in hand by way of a windfall, you can add it to your investment, which will act as your big shot – bumping up your total investment.

Constantly review and monitor your strategy. A captains strategy may change each time depending on who the team is playing against, the form of the players, unexpected injuries, pitch and weather conditions, to name a few. During the game also the captain can adopt different bowling strategies like infield, midfield or outfield, as well as different batting strategies like attack or defense.

Similarly in investing too you have to revisit your strategy every once in a while depending upon the life stage you are in, the time to your goal and change in the overall economic environment. When you are young your ability to take risks is higher, warranting a higher allocation to equities to build that nest egg. As you grow older, you start shouldering more responsibilities allowing for a gradual shift towards safer investments. Ideally, earmark a fixed date bi-annually, whereby you re-balance your portfolio to bring it in line with your risk profile.

Seek advice! Just like a coach is a guide and a mentor for the cricket entire team, you may want to take assistance from a financial coach or an advisor to help you build a holistic financial plan. It not only takes into account all your life’s goals but also your risk taking ability, liquidity requirement, taxation, etc. If you are amongst those who are financially aware and well researched, you may do this on your own. You can also take advice from family members who have been successful at investing on their own. Just remember that no matter your age or the amount of savings you have, financial planning is crucial.

Author is a young financial blogger and a qualified Mutual Fund distributor.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.